The Australian market has shown positive momentum, rising 1.7% over the past week and 12% over the last year, with the Materials sector leading at a 4.0% increase. In this favorable environment, identifying undervalued small-cap stocks with insider buying can offer compelling investment opportunities as earnings are projected to grow by 12% annually in the coming years.
Top 10 Undervalued Small Caps With Insider Buying In Australia
Overview: Deterra Royalties is a company focused on managing and acquiring royalty arrangements, with operations generating A$240.51 million in revenue and a market cap of approximately A$2.50 billion.
Operations: The company's revenue primarily comes from royalty arrangements, with a recent figure of A$240.51 million. For the period ending June 30, 2024, it reported a gross profit margin of 96.22% and a net income margin of 64.40%. Operating expenses were A$3.98 million and non-operating expenses totaled A$72.56 million during this period.
PE: 12.5x
Deterra Royalties, an Australian small cap, reported a net income of A$154.89 million for the fiscal year ending June 30, 2024, slightly up from A$152.46 million the previous year. Basic earnings per share rose to A$0.293 from A$0.2885. Despite a dividend decrease to A$0.144 per share for the six months ending June 30, insider confidence is evident with recent purchases by executives in July and August 2024 indicating potential undervaluation amidst forecasted earnings decline over the next three years due to reliance on external borrowing for funding.
Overview: Sims operates in the recycling industry with segments including Global Trading, SA Recycling, North America Metals, Sims Lifecycle Services, and Australia/New Zealand Metals, and has a market cap of A$3.12 billion.
Operations: The company generates revenue primarily from its North America Metals (A$4.49 billion) and Australia/New Zealand Metals (A$1.60 billion) segments, with additional contributions from Global Trading (A$771.20 million) and Sims Lifecycle Services (A$350 million). The gross profit margin has shown variability, peaking at 14.38% in June 2021 but most recently recorded at 9.41% in December 2023. Major cost components include Cost of Goods Sold (COGS), which significantly impacts the company's profitability across periods analyzed.
PE: 1194.2x
Sims Limited, a notable player in the metals and electronics recycling industry, has seen insider confidence with share purchases over the past six months. Despite reporting a net loss of A$57.8 million for the year ending June 30, 2024, compared to a net income of A$181.1 million last year, they have managed to grow sales from A$6.66 billion to A$7.22 billion in the same period. The company announced a dividend decrease to A$0.10 per share payable on October 16, 2024, reflecting cautious optimism amid challenging financial conditions and reliance on external borrowing for funding.
Overview: Tabcorp Holdings operates in the gaming services and wagering and media sectors, with a market cap of approximately A$5.74 billion.
Operations: Tabcorp Holdings generates revenue primarily from Wagering and Media ($2.16 billion) and Gaming Services ($176.1 million). The company has experienced fluctuations in its net income margin, ranging from -0.57627% to 0.15502%. Gross profit margins have consistently been at or near 100%, indicating minimal cost of goods sold (COGS). Operating expenses, including significant allocations to sales and marketing, general & administrative expenses, and depreciation & amortization, have impacted overall profitability.
PE: -0.7x
Tabcorp Holdings, a small cap in Australia, reported earnings of A$2.34 billion for the year ending June 30, 2024, down from A$2.43 billion the previous year. Despite a net loss of A$1.36 billion compared to last year's net income of A$66.5 million, insider confidence remains high with recent share purchases by executives over the past six months. The company announced a decreased dividend of A$0.003 per share for the six months ended June 2024 and is forecasted to grow earnings by 117% annually despite having less than one year of cash runway and relying solely on external borrowing for funding.
This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
Companies discussed in this article include ASX:DRR ASX:SGM and ASX:TAH.
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